Lyford Cay Billionaire Sir Anthony O’Reilly Declared Bankrupt

A SUPREME Court judge declared Lyford Cay billionaire Sir Anthony O’Reilly bankrupt on Friday evening after more than five hours of legal arguments concerning the procedural validity of his applications.

Justice Milton Evans, who presided over proceedings in which counsel appeared for five of the Irishman’s creditors - the Allied Irish Bank (AIB), ACC Management Loans Ltd, BNY Mellon, Lloyds International Bank and EFG Bank Trust (Bahamas) - ruled that “I’m prepared and I do make an order to adjudge bankrupt with the liberty to interested persons to apply for post-bankruptcy compositions”.

The judge added that the interim receiver will continue “until further ordered”. As a result of the decision, previous arrangements and agreements made with creditors in the recent past are considered null and void.

The ruling is the latest chapter in the downfall of Sir Anthony, 79, who was previously one of Ireland’s richest men. A former rugby international, he had a stellar career in business, becoming chief executive and later chairman of the Heinz Group and a newspaper magnate but his financial fortunes went into decline in recent years and AIB secured a judgement for €22.5 million (about $24 million) against him in June 2014.

The bank subsequently demanded that Sir Anthony disclose more information about his assets. Following some asset sales, the Irish courts were told he still owed AIB around €15m ($16 million). He also lost a fortune trying to rescue Waterford Wedgewood, a company specialising in manufacturing china, porcelain and glass, where he was the leading shareholder.

Sir Anthony was not in court for the hearing.

Prior to the ruling, Justice Evans had heard the arguments of Sophia Rolle, one of three lawyers representing the Allied Irish Bank, who asked the judge to strike out the original and amended petitions of Sir Anthony on the basis that the proceedings were not properly placed before the court and lack of inherent jurisdiction. “The court does not have the inherent jurisdiction to hear this,” AIB’s lawyer said, adding that the proceedings were also “improperly commenced”.

“You don’t think it can be ratified?” the judge probed. Ms Rolle asked the court to look at the applications filed by the debtor and “you’d see that half of the debtor’s petition has sought to be amended”. She noted “It is our position that the petitions failed to properly invoke jurisdiction regarding his insolvency.”

She also said the law does not make provision for the extention of the protection to outside jurisdictions.

“My primary concern is whether the petition has any validity,” the judge expressed.

The AIB’s lawyer referred the court to section 97 of The Bankruptcy Act. “The first issue is that the section requires a general meeting (with creditors) in a manner prescribed,” Ms Rolle said.

“Who should convene that meeting?” the judge asked.

Ms Rolle said the 1958 Rules concerning insolvency requires that an appointed receiver or individual agreed by the creditors to convene the meeting. “I don’t think the facts are disputed that the debtor summoned the meeting,” she added.

Justice Evans noted that the rules did not meet with modern times but “what is so fundamentally wrong? Is the issue being aired concerning prior agreements between the parties?”

Ms Rolle said certain presentations, prescribed in law, should have been made to the Registrar before the steps taken by the debtor.

“The evidence is not in dispute that the debtor had been in contact with creditors with intent to come to an arrangement. What is wrong with what took place? When one looks at the legislation, there’s nothing wrong with creditors getting together to put something together and put before the court for approval,” Justice Evans said.

Ms Rolle replied that the debtor failed to comply with requirements in the provisions set out in law regarding the meeting. “Notices were sent but were sent by the debtor. The provision says the official receiver was to determine the location but that was determined by the debtor.” The additional misstep, she argued, was that advertisement of their petition to all creditors in the matter was not done as required.

Justice Evans noted that from all appearances and the evidence itself, the debtor is attempting to merge sections 96 and 97 of the Bankruptcy Act, “almost like a hybrid operation”.

“Can you start in (section) 97 and wander off to 96 to receive the benefits of that provision?” the judge asked.

Ms Rolle said no because “they did not register with the Registrar in any event”.

The judge noted that bankruptcy rules did not explicitly require a petition to be filed. “It requires approaching the Registrar first,” he said.

Ms Rolle referenced a number of authority cases for the court’s consideration, including the London-based Privy Council’s decision in Stubbs v Gonzalez and the Bahamas Supreme Court (2014) ruling in the matter of Cavalier Construction.

Brian Simms, QC, contributed to AIB’s argument, noting that the 1870 rules existed for a reason and for the debtor’s applications to be recognised, he would have had to comply with not only the Bankruptcy Act but the rules as well.

Justice Evans asked Mr Simms: “Can the petition be considered a notification to the Registrar?”

“It has to be certified” Mr Simms said.

In the afternoon session, John Delaney, QC and lawyer for Sir Anthony, argued that wherever a conflict existed between rules and statute, the latter always prevailed. In this case, he said, Sir Anthony followed the guidelines of section 97 of the Bankruptcy Act.

“Is the debtor the person who should be proceeding with section 97?” the judge asked. “Yes” Mr Delaney said.

“When I look at sections 96 and 97, one speaker to the debtor (96) and one speaks to the creditor (97),” Justice Evans said.

“Both speak to both. They contemplate a consentual regime as an alternative to section four (full insolvency) bankrupcty,” Mr Delaney replied.

“But there must be an intended distinction?” Justice Evans suggested.

“They are slightly different in effect,” Sir Anthony’s lawyer said.

“Section 96 enables a debtor to summon a meeting. So it makes everything move at the debtor’s motion,” the judge noted.

Mr Delaney said while he could not supply the court with a case from the local jurisdiction, “composition with creditors” in the provision implies that the debtor has made an agreement with the people or entities he is financially obligated to.

“The section 97 petition before the court is not one drawn for the benefit of the creditors” the judge noted.

Mr Delaney said that “90 per cent of the unsecured creditors are accounted for in the composition.”

The one unaccounted for, he said, does not bankruptcy proceedings “because bankruptcy requires a sharing of assets.”

Mr Delaney said the guidelines were followed to the ‘T’ save and except for registering his client’s notion of motion to the Bahamas’ Supreme Court Registrar due to fighting and disputes on the part of AIB, who are “acting in Ireland, trying to seize assets”.

Justice Evans said to the applicant’s lawyer that “there may be sufficient cause for the court to say lets move to full bankruptcy”.

Justice Evans concluded: “I have looked very carefully at the provision of section 97 of the Act under which this petition, or application to the court is purported to be made. And it is quite clear to me that sections 97 and 96 of the Act give rise to some significant difficulties of interpretation when one seeks to apply them to the Rules which are available.

“At the end of section 97, it has this wording which I think is important for my purposes, it says ‘If it appears to the court, on satisfactory evidence, that the composition under this section cannot, in consequence of legal difficulties, offer any sufficient cause, proceed without injustice or undue delay to the creditors or to the debtor, the court may adjudge the debtor a bankrupt, and proceedings may be had accordingly.”

Justice Evans continued that “it is quite clear that there are significant differences of opinion relative to the applicability as well as the application of Rules in this matter”.

“I am also not even satisfied that this legislation give rise to the need for a petition to be filed and so there are a number of significant questions that have to be canvassed and decided. And no doubt, would result in the need for further review by the Court of Appeal and even beyond.”

“In my view, and based on everything that I’ve said before, I would be prepared to deal with the only alternative ground as being the operative in this matter. And as a result, I’m prepared and I do make an order to adjudge bankrupt with the liberty to interested persons to apply for post-bankruptcy compositions,” the judge ruled.